2018 (6) TMI 455 - HC - Income Tax

Approval u/s 80G - whether registration under Section 12AA by itself is not automatic for granting approval under Section 80G? - approval was denied on the ground that the assessee was spending more than 5 per cent of the total receipts for religious purposes as pooja expenses and telecast expenses - tribunal recorded as assessee had demonstrated that spending more than 5% of total receipts for religious purposes as pooja expenses and telecast expenses was justified - Held that - As recorded by the Tribunal that since assessee had been granted exemption under Section 12AA of the Act which was in existence and in case of any violation, the same was subject to variation/withdrawal by the CIT(E), there was no logic in denying approval under Section 80G 5(vi) of the Act. We do not find any reason to differ with the view taken by the Tribunal. Needless to say, in case, in subsequent years, the revenue is satisfied that the activities of the respondent-assessee are not qualified for charitable purposes, it shall be open for the department to initiate action for cancellation of registration - Decided in favour of assessee.

Summary

Issues:
1. Approval under Section 80G of the Income Tax Act, 1961
2. Compliance with statutory provisions for approval
3. Interpretation of charitable purposes
4. Reliance on 12AA registration for approval
5. Judicial review of Tribunal's decision
6. Application of law in granting approval

Analysis:

1. The appellant-revenue filed an appeal under Section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal, which granted approval under Section 80G to the assessee. The main contention was the approval granted despite the pooja expenses incurred by the assessee, which were deemed in violation of the Act. The Tribunal's decision was based on the existence of exemption under Section 12AA for the assessee, suggesting any violation would be subject to variation/withdrawal by the Commissioner of Income Tax (E). The appeal challenged the Tribunal's decision regarding the approval under Section 80G.

2. The issue of compliance with statutory provisions for approval under Section 80G was raised, questioning the Tribunal's reliance on the assessee's 12AA registration as a basis for granting approval. The appellant argued that mere 12AA registration does not automatically qualify for approval under Section 80G. The judgment cited a previous case to establish that registration under 12AA is not solely sufficient for approval under 80G, emphasizing the need to assess each case individually based on the circumstances.

3. The interpretation of charitable purposes under Section 80G was crucial in determining the validity of the approval granted. The Tribunal considered the aims and objects of the assessee, which included spiritual awakening, teachings of Indian saints, and assistance to the poor. Despite the religious nature of some activities, the Tribunal found justification for the expenses and approved the application under Section 80G. The judgment highlighted the importance of assessing the actual activities of the assessee to determine eligibility for charitable status.

4. The judgment discussed the significance of 12AA registration in the approval process under Section 80G. It was noted that the existence of 12AA registration for the assessee played a crucial role in the Tribunal's decision to grant approval under Section 80G. The judgment emphasized that while 12AA registration is essential, it may not be sufficient on its own for approval under 80G, and each case must be evaluated based on its merits.

5. The issue of judicial review of the Tribunal's decision was addressed, with the appellant challenging the Tribunal's findings. The judgment analyzed the arguments presented by the appellant but ultimately concluded that the Tribunal's decision was justified based on the facts and circumstances of the case. The Court found no substantial question of law warranting interference with the Tribunal's decision, leading to the dismissal of the appeal.

6. The application of law in granting approval under Section 80G was thoroughly examined in the judgment. It was reiterated that the Tribunal's decision was based on the assessee's compliance with the statutory provisions and the justification provided for the expenses incurred. The Court upheld the Tribunal's decision, emphasizing that any future concerns regarding the charitable status of the assessee could lead to appropriate actions by the revenue department in accordance with the law.